The local banking industry posted a declining net profit growth rate in the first half of this year amid a staggering economy, with higher non-performing loans (NPLs) across the sector.
The combined net profit for the first half of 2014 of the 11 SET-listed commercial banks was reported at 103.2 billion baht, a 1.01% rise from 102.17 billion year-on-year, with NPLs averaging around 3%, up from 2% of total outstanding loans at the end of last year.
Siam Commercial Bank posted the largest net profit at 27.85 billion baht, up 8.12% year-on-year, and apart from interest and non-interest income increasing, the high profit was partly due to a one-time gain from the share sale of its subsidiary, Siam Commercial Samaggi Insurance (SCSMG), booking 1.8 billion baht in the period.
TMB Bank reported dramatic net profit growth of 102% to 4.17 billion baht from a year before, which was largely attributed to selling off NPLs worth 3.3 billion baht in the second quarter, which allowed it 200 million baht to write back for an excess provision earlier.
Krungthai Bank (KTB) and Kasikornbank (KBank) both recorded improving core business, especially KTB, the country's second-largest in terms of asset size, booking impressive loan expansion of 5.78%, while KBank rose 2.3%.
The small Land and Houses Bank booked the highest loan growth in the industry at 6.06% thanks to its small base.
The other financial institutions, including market leader Bangkok Bank (BBL) as well as Bank of Ayudhya (BAY), Thanachart Capital (TCap), Tisco Financial Group and Kiatnakin Phatra all announced relatively low first-half net profits.
This was due partly to extra gains in the same period last year affecting the extraordinarily high income bases of BBL, BAY and TCap.
Also, economic uncertainty in the first half greatly affected the profitability of these banks.
The earnings of the three leading car loan banks — Thanachart, Tisco and Kiatnakin — were all dented by the former government’s first-time car buyer scheme ending in 2012, posting lower results.
However, automobile loan demand is expected to return to normal around the final quarter this year to the first quarter of next year.
As the banks' overall NPLs hiked in the first quarter, most of them set aside additional loan loss reserves in the second quarter.
Thanyalak Vacharachaisurapol, assistant managing director of Kasikorn Research Center (KResearch), anticipates the banks are likely to adopt cost management strategies in the second half to maintain profitability.
Even though positive economic signs are gaining momentum, pricing competition has already begun in the deposit market. The profit results were below KResearch estimates as it projected a marginal increase from fee-based income rather than core performance.